BP shares close lower as CEO tells Congress he’s ‘devastated’ but doesn’t have all the answers

BP shares close lower as CEO testifies to Congress

Shares of BP PLC zigzagged up and down on Thursday as the company’s CEO tangled with lawmakers over the cause of the well blowout in the Gulf of Mexico.

BP’s U.S.-traded shares closed down 14 cents at $31.71. They rose to $32.46 in the morning and dipped as low as $31.25 in the afternoon.

The slippage wiped out some of the gains from the day before, when BP shares rose after the company agreed to pay into a $20 billion compensation fund and to suspend dividends the rest of this year.

Standard & Poor’s cut BP’s long-term credit rating to “A” from “AA-minus” and lowered a short-term rating too while maintaining a “negative” outlook that could foreshadow another downgrade. S&P said higher estimates of the spill’s size, along with questions raised Thursday by lawmakers, caused it to raise its estimate of BP’s potential liability.

In Congress, lawmakers grilled BP CEO Tony Hayward about the April 20 blowout and asked whether the company took moneysaving shortcuts that might have contributed to the accident.

Hayward repeatedly told members of a House energy subcommittee that it was too early to know what caused the explosion. He refused to debate decisions made by BP engineers on the Deepwater Horizon drilling rig, which executives of other oil companies said this week defied industry standards.

“I wasn’t involved in any of the decision-making,” Hayward said. He said he was sorry about the accident, which killed 11 workers and left a gaping well that’s still spewing oil into the Gulf.

BP’s shares have fallen about half since the accident. BP officials say the company is still financially strong, but on Wednesday, chief financial officer Byron Grote didn’t rule out “external financing.” CNBC reported that the company’s investment bankers suggested a debt offering of $5 billion to $10 billion.

Adam B. Cohen, an analyst for Covenant Review LLC, said a bond sale could divert more of BP’s cash toward interest payments on debt. But any concern among shareholders should be outweighed by the positive signs that a successful offering would send about confidence in BP’s long-term survival, he said.

Pavel Molchanov, an analyst with Raymond James, said Hayward was being properly vague in answering lawmakers’ questions about specific technical decisions made on the drilling rig.

“He doesn’t want to say something which will later be proven wrong,” Molchanov said. He said Thursday’s hearing was political theater that won’t have much bearing on BP shares.

“What matters for investors isn’t what Tony Hayward says,” Molchanov said. “It’s getting the well capped, getting our hands around the magnitude of damages — $20 billion is a floor, not a ceiling — and cooling down the political rhetoric in Washington.”

At home in the U.K., concern is growing that BP’s problems could hurt pension funds that hold major stakes in the company. Britain’s populist Daily Mail tabloid defended BP against “a show trial by American politicians,” and warned that British retirees could end up paying for the oil spill cleanup.

Associated Press Writer Raphael G. Satter in London contributed to this report.